RWE-DEA Aktiengesellschaft für Mineraloel und Chemie and Deutsche Shell GmbH, both based in Hamburg, agreed on contributing their downstream activities in Germany, i.e. manufacturing of petroleum products, supply and marketing of petroleum products and petrochemicals manufactured in refineries - into a new joint venture company. Under the name of Shell & DEA Oil GmbH domiciled in Hamburg both partners will pool their downstream activities and maintain the existing DEA and Shell brands.
RWE's President and Chief Executive Officer, Dr. Dietmar Kuhnt: "The cooperation with Shell provides DEA's downstream business with significantly better growth prospects in the extraordinarily competitive German petroleum market." The proportionate consolidation of the joint venture ensures that RWE-DEA will continue to benefit from the positive profit trend in the refinery business. The upstream activities - exploration and production of oil and gas - will still be expanded consistently by RWE-DEA.
The agreement between RWE-DEA and Shell provides that both companies contribute their downstream activities to the new joint venture, in which each company will have a 50% stake, with economic effect as from July 1, 2001. In 2004, Shell will have the opportunity to acquire a majority interest of 51 %. RWE-DEA will be able to sell its stake to Shell in 2003/4. The cooperative venture is subject to approval by the responsible antitrust authorities.
Fierce competition makes structural changes indispensable
Petroleum downstream business in Germany and the entire region of western and northern Europe is characterized by a mature market under extreme competitive pressure and a strong trend towards further consolidation. Prices paid by German final consumers are among the lowest in the whole of Europe. Only those companies will be successful that succeed in exploiting all cost synergies by using economies of scale to adequately cope with the difficult phases of this business which is subject to strong cyclical fluctuations. The joint venture planned provides the opportunity to make the necessary cost reductions. Annual savings of approx. DM 300 million, which will be fully realizable by 2003, are expected.
Joint venture company to become market leader in Germany
The joint venture combines two leading petroleum companies in Germany which have state-of-the-art, highly productive refineries and an excellent service station and petroleum trading network, expertise and creativity. The businesses of both companies complement each other well.
- With a crude oil refining capacity of 34.3 million tons annually, the joint venture company will become Germany's largest crude oil refiner.
- With some 3,200 stations, the joint venture company will be the leading service station company in the German market.
- With its service, customer focus and innovative solutions, the company will be a leading provider to petroleum customers in Germany.
Including its subsidiaries, the joint venture company will have approx. 7,500 employees. Realizing the synergies expected will involve a gradual reduction of presumably 750 jobs, essentially in marketing and sales, administration and production. The staff will be reduced in a socially compatible manner which will be the subject of forthcoming agreements with the co-determination committees.
At a press conference at 11.00 a.m. in the Interconti Hotel at Hamburg, RWE and Shell will comment on further details. The meeting will be broadcast live on the Internet: www.rwe.com